New Stock Purchases in Tom Gayner’s $2.4 Billion Fund
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Markel Gayner Asset Management is the investment division subsidiary of Markel Corp. and is headed up by Tom Gayner, who also spends his time as the CIO of Markel. The fund is directed by the SEC to release its holdings every quarter in a document known as a 13F filing. We look forward to the release of these filings, as we use them to create proprietary, retail-friendly strategies that have proven to beat the market in real-time. See below for our take on the five largest new positions initiated by Gayner in the fourth quarter of 2012.
Alliance Holdings GP, L.P. (NASDAQ: AHGP), a producer and marketer of coal, stands out as Gayner’s largest new purchase with a commitment of nearly $8 million. AHGP’s only assets are derived from its ownership interests in mining company Alliance Resource Partners, which recently emerged from a difficult 2012. AHGP’s last earnings announcement in January delivered a beat of $0.08, continuing the company’s trend in exceeding analysts’ expectations in recent quarters. Revenue grew almost 16% year over year. Billionaire Jim Simons of Renaissance Technologies has a $428,000 investment in AHGP (read about his portfolio here).
Premium subscription media provider Starz (NASDAQ: STRZA) received a $1.4 million dedication from Markel Gayner. The entertainment channel was recently spun off from Liberty Media, with previous shares of LMCA renamed as STRZA shares. New shares were then generated under the LMCA ticker at the end of January. STRZA has already returned an incredible 53% to investors so far this year. Last month, Sony extended its movie-licensing deal with Starz until 2021, which is estimated to be valued at $300 million annually. Billionaire Paul Tudor Jones of Tudor Investment Corp purchased 2,500 shares last quarter as well.
Bunge Limited (NYSE: BG) took the third spot in terms of capital allocated to new purchases, earning $700,000 from the fund. The $11 billion agribusiness and food company reported Q4 2012 results at the beginning of last month, unveiling a huge disappointment amounting to 76% below expectations. The stock plunged over 9% on the news, undoing some of the double-digit returns it had achieved going a year back. BG’s operations and prosperity suffer when commodity prices decline; weather and currency exchange rates also have a significant impact. Billionaire Ken Griffin of Citadel Investment Group reduced his call position in BG according to his latest 13F.
Arch Coal (NYSE: ACI) was another resource play of Gayner’s with an apportionment of almost half a million dollars. The second largest coal producer in the US has had a rough start to 2013, losing almost 30% since the turn of the year. On a more positive note, the stock carries a dividend yield of nearly 2%. Negative earnings were speckled among a few positive announcements in 2012; the most recent release on the fifth of last month revealed another disappointment, surprising analysts with a 200% larger loss than expected. ACI is hoping that increased demand abroad will help pad its bottom line in 2013, which saw deterioration after weakened manufacturing, a mild winter and increased use of alternative energy took their toll this past year. Billionaire Glenn Russell Dubin of Highbridge Capital Management initiated both equity and options positions last quarter.
Resolute Forest Products (NYSE: RFP) was Markel Gayner’s last new purchase that we’ll cover; the fund devoted $238,000 to the stock in Q4 2012. RFP is a global forest products company, as its name implies, producing paper, pulp, and wood products. 21 out of the 400+ hedge funds we track claimed ownership of RFP in the fourth quarter of 2012 (this is compared to seventeen a quarter prior). The company gave an earnings beat on the twelfth of last month, although revenues came in at slightly less than expected. RFP’s return spanning the previous twelve months came in at 22 percentage points under the return of the S&P 500. Billionaire Louis Bacon of Moore Global Investments invested nearly $1 million in RFP this past quarter.
Gayner’s stock picks are mostly unloved stocks. The most popular stock in this group is Arch Coal, which is a risky investment. Our favorite pick among these five stocks is Resolute Forest Products, which recently started to take off. We have confidence in its management, which announced a large stock buyback last May, and RFP has returned 45% since then. Gayner’s stock picks aren’t for every investor. If investors don’t want to do the leg work and research these companies, their best alternative is to buy Markel’s stock.
This article is written by Eric Winter and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!